Financial and Economics Literacy: Doc
Added on 2021-01-02
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Financial and EconomicsLiteracy
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1MAIN BODY...................................................................................................................................11. Pursuit of profit maximisation is consistent with consumer sovereignty...............................12.Examination of the market structure, demand and supply of the companies...........................23.Concept and objectives of the financial management..............................................................34. Contribution of environmental policy, fiscal policy, supply side policies to UK economic .5Prosperity....................................................................................................................................55. Calculations.............................................................................................................................7a. Ratio Analysis.........................................................................................................................7b. Present Value..........................................................................................................................8c. Net Present Value....................................................................................................................8CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10
INTRODUCTIONFinancial literacy is considered as the process of financial, credit and debt managementwhich is required for carrying on any business and other operational transactions. It is veryimportant to have accurate and correct knowledge and information about the financial andeconomical concepts so as to make financially decisions. It also involves knowing of how tomake appropriate economic choices, understanding role and impact of economy in the societyand making use of entrepreneurial skills for enhancing the operational productivity and growthoptions. The report will be based on the business and financial economics principles used ininternational context. Further it will show that how the governmental, monetary and economicpolicy along with the macro & micro concepts and models have impact to business decisionmaking. Also, the report will shed light on financial rationale and its interpretations havingimpact on the decisions of users and stakeholders. At last, the report will discuss the relationshipbetween theory and application in business and financial economics.MAIN BODY1. Pursuit of profit maximisation is consistent with consumer sovereigntyConsumer sovereignty is defined as the mechanism in which consumers hold the powerand authority to influence the production and its operational decisions on the basis of what goodsand services have been purchase by them. Consumers have the power to influence the demandlevel for company's products and services. It simply refers to the authority of consumers todetermine and assessed that what will be produced through their purchases of goods and servicesdecisions. The power of consumer includes manipulation of the market forces by influencing thedemand situation by determining what should be produced in the market. It basically means thatthe production function of company depends highly on the psychology as well as the choices andpreferences of consumers (Epstein and Leoni, 2017). Consumer sovereignty works in the freemarket economy due to privatization along with lesser or no government intervention.Consumers affects the profit maximisation factor of the company as well. As consumersare free to purchase or consume goods and services from the market place as per theypreferences. With increase in the demand of these products and services, the prices also will riseand thus provides profitable and fruitful situation for companies. It also helps in seeking1
competitive advantage & high profit margin by entering into the production function of thesegoods for ensuring supply on time.It is considered as the economic theory in which consumers have the right to bestdetermine about what goods and services should be produced by the company in the society.Producers should focus on the needs of consumers and then produce accordingly so that goodsmanufactured can be easily sold.This also means that consumers can make use of their purchasing or spending power inform of votes for goods and services which are available in the market. As a result of which,producers emphasizes only to those preferences which has high demand and then produce goods.It is thus an economic concept which refers to the controlling power of consumers overthe production decision and profit earning (Sassatelli, 2015). With the help of consumersovereignty optimal allocation of scarce resources can be done by focusing on what finalproducts should be produced for meeting the expectation level of consumers. It also helps producers in achieving the economies of scale along with minimum cost ofproduction and operation. The company should make use of scare resources effectively andefficiently towards the attainment of goals and objectives in a cost effective manner therebyfostering sustainable development of the economy.2.Examination of the market structure, demand and supply of the companies.Market structure- markets are categorized by the degree of their competitiveness and thepricing. The market structure is classified in four types that are perfect competition, monopoly,oligopoly and monopolistic competition. The market structure of the Tesco is said to be asoligopoly market as the supermarket industries in UK described under the oligopoly. Tesco is notthe only supermarket in the UK (Azevedo and Leshno, 2016). It acts as the dominantshareholder but cannot be called as a monopoly as there are many other firms which are incompetition with the Tesco. Mac Donald's also reflects the oligopoly structure where there arefew nos. Of large and the small firms in particular market and the industry with the very limitedcompetition. Mac Donald's operate in this structure because very few firms in the business of fastfood industry are present in the America and are the price makers with the interdependence onthe policy actions. British Airways also functions under the oligopoly structure as airline industryin the UK. Hairdressers industry has the market structure of monopolistic competition as it hasmany competitors with minimum market share and not considered as the price makers.2
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